News home sales in May fell 6% from a downward revision to April’s huge numbers.
Those April numbers looked too good to be true, and they were. Yet, the May numbers were the second best in the recovery.
Home builders had to offer lots of concessions to get these numbers, and new buyers cannot afford much. The Median price on new homes fell a whopping 9.3%.
Let’s take a look at the other details from the Bloomberg Econoday report.
Highlights
Data on new home sales, due to small samples, are always volatile, but underlying the monthly swings is a trend of strength. New home sales fell a severe looking 6.0 percent in May but the annualized sales rate, at 551,000, is second best of the cycle, next only to April’s 586,000 (revised downward from an initial 619,000).
Home builders were offering concessions in the month based on the price data where the median fell 9.3 percent to $290,400. Year-on-year, the median price is up only 1.0 percent. A positive in the report is supply as 3,000 more new homes entered the market bringing the total to 244,000. Relative to sales, supply improved to 5.3 months vs 4.9 months in April.
The South is the driving force in the data, dipping 0.9 percent to a 323,000 rate but still up 13.3 percent year-on-year. In contrast, sales in the West, which is also an important region for new homes, fell 15.6 percent in the month to a 124,000 rate which is down 8.8 percent on the year.
Trends right now in the housing market do not appear to be red hot but only moderate, which perhaps is a positive for an often boom-and-bust sector.
New Home Sale Trends
Will May be revised lower as well?
Supply Nonsense
Month after month, the Bloomberg Econoday writer mentions supply of new home sales as if it is some kind of restraint.
Actually, there is never a huge supply of new homes already built for people to look unless builders go crazy building spec houses. The last time they tried that it ended badly. Instead, the typical buyer looks at a few different models, is offered a set of options on those models, then negotiates a price.
New homes are reported as sold the moment a deal is signed.
Supply is a factor on existing homes where an overabundant supply tends to lead to falling prices. Here too writers get things wrong. If supply is holding back sales, it’s likely prices are higher because of that fact.
Returning to new home sales, if builders have to offer huge concessions and median price is going nowhere, one has to wonder if we are scraping the bottom of the barrel in terms of what the declining pool of remaining buyers can afford.
Mike “Mish” Shedlock
April not only month revised lower. Numbers are SAAR.
February 538K —> 525K
March 531K —> 522K
April 619K —> 586K
“Home builders were offering concessions in the month based on the price data where the median fell 9.3 percent to $290,400.”
price not only concession … just the one we know about.
…
Say, what if we throw in a back deck? .. granite counter top? … I know, a walk in shower?
Throughout the G7 countries, debt levels have been growing faster than GDP. That only works for a short period, then it causes more problems then it solves — and we are at that point if not beyond it.
No matter who wins the Brexit vote, Europe will have a recession (a worse recession if you are not an ECB employee). Too much debt.
No matter who wins the US elections, the US will have a recession (again, a worse recession if you are not a Fed “economist”). Too much debt.
People with 0-2% savings rates, paying 30%+ Obamacare increases (not to mention deductible jumps), and getting part time jobs to replace the full time work they used to have — they can live off credit cards and home equity lines for a little while.
After that, they have to stop buying new houses. Even if they want a new house and even if the Fed manipulates mortgage rates low enough — part time paychecks have trouble paying exorbitant property taxes on $400K “starter” homes
Another thing might be the SIZE of the houses are declining – where we are builders have gotten into the smaller home kick – more potential buyers.
Here is the SF bay area homes are larger, lots are smaller and denser. The stupid homes are three stories.
“one has to wonder if we are scarping the bottom of the barrel”
Did you like “scarping”
Changed to scraping
I’ll call a top since price AND volume decreased month over month. Usually volume will dry up first, but both declining in a big way after a recovery high makes me think a sharp reversal has begun.
Real estate sales and trends move west to east……always. West getting slammed. Rest of country on its way down.